Mayor: Hazleton at its 'fiscal cliff'

ELLEN F. O'CONNELL/Staff Photographer
Hazleton Mayor Joseph Yannuzzi talks about the state of the city and the proposed tax hike during a press conference Tuesday at City Hall. Also pictured is Steve Hahn, acting administrator.

"Today, Hazleton has hit the fiscal cliff," the mayor said. "If we do not approve this budget, the consequences will be far reaching."

The mayor called the press conference a day before city council is expected to vote on first readings of a series of budget-related ordinances that establish tax rates for 2013.

If council fails to set tax rates, the mayor said the administration might be forced to consider furloughing city employees or investigating whether the city would be eligible for state assistance and a tax restructuring available to financially distressed communities under Act 47. In either scenario, the mayor said he plans to talk with at least one company about selling or leasing Hazleton City Authority water system assets.

The administration also asked delegates from all four city unions - streets, City Hall, police and fire - to consider reopening contracts and agreeing to concessions. Yannuzzi said he did not discuss specific cuts with union officials, but had asked them to consider all possibilities.

"It was nothing specific," he explained. "It's just what they would feel comfortable with. They won't give up enough to save (a revenue shortfall of) $2 million."

The mayor, however, said he has not entertained the notion of taking a pay cut or asking any department heads to follow suit. Former Mayor Lou Barletta took a 5 percent pay cut in 2003.

"The mayor's salary didn't go up for 13 years," Yannuzzi said.

The mayor said he has "other solutions for getting income to the city," but can't divulge details at this point.

Stagnant revenue and taxing limitations that the city endured for the 36 years leading to the 2008 reassessment of Luzerne County properties forced previous administrations to rely on gimmicks such as payments from a mine land developer for balancing city budgets, Yannuzzi said.

The mine land payments drop from $600,000 this year to $20,000 next year as part of a developer's agreement. The budget takes another $1 million hit next year when sewage transmission revenue dries up with the transfer of the sanitary lines to Greater Hazleton Joint Sewer Authority.

The mayor said he called the press conference to explain these and other factors contributing to the massive property tax increase and a proposed wage tax hike.

"I really want (the public) to understand the situation," Yannuzzi said. "This is a serious problem and there's not too many ways to solve it."

The tax rate for the general fund, debt service and recreation funds stands at 3.11 mills this year. The latest budget proposal would increase the overall rate to 5.69 mills. Under that scenario, property taxes would increase from $286.12 to $523.12 for a home assessed at a median value of $92,000.

Additionally, the budget contains an increase in a portion of the earned income tax earmarked for the pension fund. This year's budget includes a 2.25 percent EIT, of which 1 percent goes to the Hazleton Area School District, 0.5 percent to the city's general fund and 0.75 percent for city pensions. Under the proposal, the pension portion would increase from 0.75 percent to 0.85 percent - a 14 percent increase - that will generate an additional $82,000 for pension obligations.

Furloughs of city employees are not on the table at this point, the mayor said, but the administration could further investigate that option depending on how developments unfold with the budget in the next two weeks.

Other potential solutions include revisiting talks for selling or leasing HCA water system assets, but the mayor acknowledged that any proceeds that would result from such an arrangement would not be available in 2013. Yannuzzi said he plans to talk with at least one interested party within the next week or two.

Challenges

Flanked by Acting City Administrator Steve Hahn, the mayor said council's approval of the $8.97 million budget is vital in an effort to secure a tax revenue anticipation note for paying bills through early 2013, or until tax collections begin to pick up. Budget approval is vital to the city demonstrating it is capable of paying bills, which is essential to the administration's plans for refinancing two high-interest loans, Yannuzzi said.

While he asked union leaders to consider reopening contracts, Yannuzzi said the city is bound by deals negotiated under previous administrations.

"Our labor contracts were set years ago and are going to take years to change," he said. "We're working on that."

During Yannuzzi's term as mayor, council approved a contract in November 2011 that awarded annual raises of 2 percent to 4 percent to unionized City Hall employees and longevity pay hikes for employees who worked for more than 25 years. Council approved the deal on a 3-1 vote, with Councilman Jack Mundie voting "no" and then-Councilman Chris Puza not in attendance.

A month later, council voted 3-2 when approving a seven-year contract that Yannuzzi's administration negotiated with unionized police. Mundie and council President James Perry voted "no" on that agreement, which was estimated at the time to cost the city $100,000 per year or more in raises, pension and health-care perks. The contract awards a 2 percent raise this year and 3 percent pay increases over the next three years. The contract will be reopened and pay raises negotiated for the final three years.

If the administration considers layoffs, provisions within the police contract would prevent the city from realizing immediate savings.

According to the agreement, the city is required to provide, in writing, two weeks notice to the union if it is contemplating layoffs. If layoffs occur, they would be conducted in inverse order of seniority, with furloughed officers eligible to receive "all medical and insurance benefits" for 18 months and severance pay equivalent to six months salary.

Officers hired after Jan. 1, 2007, meanwhile, would be eligible for all health and insurance benefits for 18 months.

The mayor, however, said he doesn't believe the pay- and benefits-related provisions would withstand a legal challenge.

Other issues

The mayor said several other items were not built into the proposed 2013 budget, including:

n A capital budget for large-scale vehicle or equipment replacement, though there is a line item for leasing four police cruisers.

n Payouts the city would have to make to retirees for sick or vacation time buy-backs.

n Money the city would potentially have to pay if it loses its ongoing illegal immigration court case.

Regionalizing services, such as firefighting, will improve operations but might not yield a large financial savings, the mayor said. Yannuzzi said he has pushed for regionalizing police, but that effort has fallen by the wayside.

Taxes

The mayor and Hahn shared a chart comparing Hazleton's tax rates with those assessed by similar-sized municipalities.

At Hazleton's current rate of 3.11 mills, the owner of a $100,000 home pays $311 in taxes, Hahn said. That translates to $569 for the same home under the 2013 budget proposal, Hahn said.

Hazleton's roughly $7.6 million budget for 2012 equates to a $302.42 "cost" for each of its 25,340 residents, according to the administration. Easton, meanwhile, has 26,800 residents but a $28.8 million budget, meaning that city spends $965 per person.

Hahn said Hazleton's struggles stem mostly from losing "big chunks of revenue," including a portion of sewer transmission funds that historically paid debt service payments. Sewer transmission funds for paying debt will no longer come from the annual $84 fee, the mayor said. The loss of that revenue, which instead will be collected by the joint sewer authority, has been built into the 83 percent tax increase.

sgalski@standardspeaker.com

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